All Forum Posts by: Arn Cenedella

@John Morgan

Nice approach. Good work,

Just curious, how much equity do you have in your 29 SFR rentals?

Arn

@Kyle Kline

“Investing for equity and not cash flow” doesn’t mean “buy properties that don’t cash flow.”

To me, invest for equity not cash flow means that the PRIMARY reason to invest is for equity growth and an increase in net worth and NOT cash flow.

I’ve been investing for over 40 years and while cash flow is important, it’s not why invest.

A property must be self supporting ie produce enough cash flow to cover debt service, operational expenses including repairs and replacements. So even if the cash flow is only 3% or 4% cash on cash, that’s enough to provide a protective layer to cover unexpected items.

To me, the cash flow is NOT to put spendable cash in my pocket NOW but rather keep the property self supporting while it increases in value over the long term.

In addition, every property a purchase has a cash reserve fund - call it my rainy day fund or my Sominex account (ie I can sleep at night knowing if the furnace goes out I have $8,000 in my reserve fund to replace it.)

One final note, I have found once one reaches a certain net worth, cash flow no longer is a concern, there is always as much cash flow as anyone wants.

Final note, who will have more cash flow someone with $1M investible cash or $3M investible cash? The answer is obvious.

I invest to create equity growth.

Hope this helps,

Arn

@Orchid Djahangirian

It appears a few clarifications are in order here.

1. A 1031 exchange is NOT available for owner occupied property so that’s the bad news.

The good news is for owner occupied primary residences, for married couples, the first $500,000 of pain is tax free.

No need to worry about a 1031, live in the house, sell it, use the $500,000 exclusion and you pay KP tax on whatever profit may exist,

2. There is much confusion about the 4% and 6% in property taxes.

Non owner occupied property is taxed at 6% of the value to get the taxable value.

This does NOT mean your actual property tax is 6% of the purchase price for rental property,

In reality property taxes are about 2% of the purchase price for rental properties and about 1% of the purchase price for owner occupied properties.

Google Greenville County Property Tax estimator and play with it and get a sense of how it works.

3. We moved to Greenville 10 years ago from SF Bay Area Silicon Valley and love it. Great place to live great place to invest. You will love it here.

@Jose Remor

Hard to find a good property manager. 

If you DM me I can provide a referral in Greenville SC where I live and invest. 

Arn

Laura, YES hiring an attorney and going to court is costly and a real pain in the rear. And ultimately probably won’t produce the result you want. Best to build relationships, get to know people and use your life experience to judge character and integrity. Your instinct may not always be accurate but overwhelmingly I find it is.

Laura, YES hiring an attorney and going to court is costly and a real pain in the rear. And ultimately probably won’t produce the result you want. Best to build relationships, get to know people and use your life experience to judge character and integrity. Your instinct may not always be accurate but overwhelmingly I find it is.

@Philip Anderson

* Santa Cruz Beach Boardwalk

@Philip Anderson

I grew up in Los Altos and Mt View and spent many a summer day a long time ago on the Santa Beach Boardwalk.

Spent many nights camping at Aptos State Park, days playing golf at DeLaveaga, Ft Ord, and Poppy Hills. We had a family tradition of spending the week before Labor Day in Carmel.

Small world.

We left the Bay Area 10 years ago and moved to Greenville SC. It’s been a great move for us. I can assure you there is intelligent life outside coastal CA. 😀

If I may make one other suggestion - understanding investment aspects are primary. You might really consider buying in a market you may some day move to. You can find good investments in all the markets you mention - AZ might be my least favorite.

Down the road it will be easier to manage the property if you live nearby.

And many make a relocation over time, spending 2 months a year in the new location and then over time increasing time spent in the new location -  while one “winds up” their old life and starts a new life -so say buying a quad or 8 unit building would allow you to establish a beach head in the new location.

Good luck. 

@Philip Anderson

1. I’d want to be very clear about SDIRA regulations regarding self-involvement. Your “I will collect the rents” sounds like property management functions. I do know for a fact, your SDIRA could NOT pay you as an individual any PM fee. Whether no PM payment to you as an individual negates the concern over self-involvement, I do not know. I suspect it’s not quite as simple as you perceive but I could be wrong. 🤷‍♂️

2. Be sure you understand how UBIT tax works for an investment purchased with debt and SDIRA ownership. It’s not a deal killer per se but I find far too many investors are surprised about this issue after they have already made the investment. Figure this out first. Rates for SDIRA loans are often higher than rates for non SDIRA loans.

3. Be sure to understand how debt will work and how SDIRA purchase impacts this. Given your $450K down, you’ll be looking to buy something for $1.5M - $1M loan. This most probably will be a recourse loan from a local bank or credit union. With a recourse loan, the lender may ask you to sign a personal guaranty. Does that violate SDIRA regs? Don’t know, but you need to find out.

In terms of market, you want to choose a market where you can get to easily - 2 or 3 hour drive or non stop flight. If it takes all day to get there, you won’t be able to spend enough time to get there as often as you need.

4. I am a San Francisco Bay Area expat now living in Greenville SC and loving it - great place to live great place to invest. My caution is there are lots of sharks out there looking to take advantage of a big money CA investor - this is of course a generalization- but often CA investors overpay going to a new market. Be sure you take the time to really understand the lay of the land. Talk to the folks in the coffee shop or restaurant - the Uber driver - people out and about. They have nothing to sell so you will get the straight story from them.

Good luck 

Arn

@Bruce Lynn

💯 

Add in each investor is different. 
Are you investing for cash flow or for appreciation?

What’s the investor’s time horizon?

There is no such thing as THE best market.